MORNING LIVESTOCK REPORT                 Monday May 5, 2008

LEAN HOGS

Hog futures closed higher across the board on Friday with no real feature in the hog spreads. The board traded in a very narrow range with the closing prices not far from the opening bell. The hog market suffered what I'd call a "sea change" last week with the perception that export business is beginning to slow. Technical damage was sustained last week and it appears the seasonal highs are in place. Fundamentally, the hog slaughter is beginning to taper off slightly with last week's kill pegged at 2.155 million, down from the previous week of 2.245. However, the weekly kill was still 9% above the year ago actual slaughter. The pork cutout value is likely near a high at Friday's quote of 75.19. As the pork industry continues to liquidate breeding stock along with Canada the lean hog futures are taking on a bi-polar look; bearish in the near by contracts and the further out you go the more bullish the outlook. In the face of a mostly steady cash hog outlook for early this week I'm expecting a steady to slightly lower board.

LIVE CATTLE

Live cattle futures closed higher across the board on Friday, seemingly taking in stride the steady cash activity from Thursday. In sneaky type fashion the Oct live cattle contract closed very close to its contract highs. Total OI in the live cattle from Friday's trade was up 2,027 cars. In the face of another aggressive slaughter week the wholesale beef market on Friday was up .20 at 154.46. Cattle slaughter for the week was pegged at 699,000, up 5% from last year. Beef packer processing margins are vastly improved. They're expanding their slaughter operations and aggressively securing inventory. Beef demand also appears to be expanding as we move back into the export business. My opening call is steady to slightly higher across the board.

Questions/comments about this article, please contact Dennis at 1.877.377.7905 or dennis.smith@archerfinancials.com.

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